(Closed) Emergency Fund (with a poll)

posted 4 years ago in Finances
  • poll: How much would you keep in an emergency fund in my situation?

    $5,000

    $10,000

    3 months of expenses (approximately $13,500)

    6 months of expenses (approximately $27,000)

    More than 6 months

    Other....I will tell you in the comments!

  • Post # 2
    Member
    15287 posts
    Honey Beekeeper
    • Wedding: June 2011

    If it’s a high interest loan, I’d try to knock that out as quickly as possible sooner than later.  If you wait until the end when there’s just say 2 or 3k left, then you’ve already paid up most the damage in interest by then (assuming it’s a “normal” loan where it’s very interest heavy in the beginning and mostly princple at the end) and there’d be no point in using the savings at that point to pay it off to save the interest.  At that point you might as well continue to make the regular payments.  It would make more sense to do that as early as possible to reduce the amount of principle you’re paying intrest on.  ‘

    If you could survive on one income plus a side job that you could easily get, then I personally wouldn’t really worry about keeping too much in the emergecy fund.  5-10k sounds reasonable to me.  To lock up anymore rather than paying debt seems unnecessary imo.

    Post # 3
    Member
    564 posts
    Busy bee
    • Wedding: July 2016

    We always have 6 months of expenses for an emergency, plus more savings outside of the emergency fund. No matter how healthy it’s good to be prepared, unexpected accidents would cause just as much of an issue and are not related to health (ie car accident)

    Post # 4
    Member
    4239 posts
    Honey bee
    • Wedding: August 2015

    I get you wanting to keep it in savings, but if you have it, I’d say pay off the loans.  That will free up a lot more income that can go back to your savings account.

    It sounds like you have your life on track financially which is really great, especially in your mid-20’s!  You don’t mention this in your post but  be sure you are also fully funding a retirement account!

    Post # 5
    Member
    1582 posts
    Bumble bee
    • Wedding: October 2016

    At least 6 months of expenses, but is 27000 for that figure based on bare minimum? I’ve calculated our expenses based on current spend and what we do to mitigate spend in an emergency situation; i.e., dropping cable, reducing cell plans, skipping the gym, etc. Because remember if you are in a job loss situation it isn’t just about how much you’ve saved but how you can cut expenses till you’re back on your feet, too. So that could help too! I think you can afford to drop to 8K from 10K to knock the loan out faster. You could always put the money you would have paid on that loan for the next few months back into savings till you recoup there and then switch over to hitting the rest of the loans harder. And you didn’t mention it since it’s probably just not relevant right now, but I hope that you have retirement savings in the mix too!

    But just wanted to add that you both sound very financially responsible already and way ahead of a lot of people. Keep at it! 🙂

    Post # 6
    Member
    1943 posts
    Buzzing bee

    I always do 3 months because you never know what could happen. My sister had a stroke at 26. Who could have predicted that? My friend just died at 32. His wife is pregnant. 

    If you have 3 months, then pay off the student loans because it’s not bad debt. But I know not wanting to have any debt. 

    You guys are doing an amazing job though so that’s excellent! 

    Post # 7
    Member
    13951 posts
    Honey Beekeeper
    • Wedding: November 1999

    We try to keep 3-6 months in an emergency fund and work off paying off my student loans as fast as possible.  

    I think definitely at least 3 months is necessary.  If your jobs are as stable as they can be, in a good, stable industry, 3 months is sufficient until you’ve paid off your loans.  Then I’d suggest building it up to a minimum of 6 months.

    Post # 8
    Member
    1105 posts
    Bumble bee
    • Wedding: May 2014

    I think 3mo in your situation is fine, it will give you time to find a new job or recover from non life threatening illness. After your loans are paid off, definitely get to 6mo. 

    Im in the same boat as you, DH had 120k in SL debt when I met him, we are down to 30k and just the lowish interest ones (only two left woot woot). I think its fantastic youre tackling this now, good luck!

    Post # 9
    Member
    422 posts
    Helper bee

    I think you’re good where you are at. At a certain point it makes more sense to pay off the debt faster so you don’t have as many financial obligations in the event that there *is* an emergency. We’ve tended to keep an emergency fund of $5000 as we pay down student debt and our car note.

    Post # 10
    Member
    217 posts
    Helper bee

    Pay off your loans. Why pay five years of interest of you don’t need to?

    Post # 11
    Member
    9144 posts
    Buzzing Beekeeper

    View original reply
    MissBridge :  Do you mind sharing the interest rate on the student loans and about how much that interest is currently costing per month? That would factor highly into my decision if I were you. If it really is high, I’d focus on knocking that out quickly before padding the emergency savings. If it’s not really that high, then it might be worthwhile to build up the savings. Student loans and mortgages are “good” debt — relatively of course. As long as you’re paying as agreed, they don’t look bad to anyone who’s reviewing your credit report.

    Post # 13
    Member
    9144 posts
    Buzzing Beekeeper

    View original reply
    MissBridge :  I know it seems overwhelming, but that’s actually not that bad, especially considering you also have savings AND you’re able to pay a good amount over the minimum. You sound really diligent and disciplined. Are you always thowing the extra towards that 6.8% one? A lot of people are tempted to spread it out, or put it towards the lower balance loans just to get rid of those quicker. That’s a better strategy than just paying minimums, BUT the best strategy, which will help pay the entire balance faster with less interest, is to always put ALL the extra towards the highest interest one. Then if/when that one is gone, you put what you had been paying on that one (so, the payment amt + the extra) towards the next-highest, etc. It does keep those little ones on the books longer, but if your main goal is getting rid of all the loans asap and paying the least amount of interest overall, always throwing extra at the highest rate will do that. I think your savings sounds fine for now, and I would focus on getting rid of the debt. (This is an amateur’s opinion, past performance is no guarantee, blah blah blah)

    Post # 14
    Member
    393 posts
    Helper bee
    • Wedding: May 2017

    View original reply
    MissBridge :  I agree with 
    View original reply
    Daisy_Mae :  that you and your Fiance are diligent and disciplined. I also agree with her strategy of putting more toward the high interest loan. Do either of you have a financial advisor from your job or your financial institution that you can strategize with?

    Post # 15
    Member
    1254 posts
    Bumble bee
    • Wedding: October 2016

    Pay down the highest interest loan as aggressively as possible. Just make the mandatory payment on the others. I would let your savings dip a little bit if it means getting rid off the 6.8.

     

    you sound very financially astute and responsible!!!

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